Investing in Trenton, NJ. Good Idea?

Question

I'm looking to purchase my first SFR in NJ, and Trenton caught my eye due to the low entry point. I visited a few properties out there last weekend, and I'm thinking of putting an offer in on one of them but I'm not sure if I should. After reading through a few old forums about investing in Trenton, I'm a little nervous. The property in question is a SF currently rented MTM at $1,650. It's very close to the Cure Arena. Is this considered one of the good areas? Are houses appreciating?

If you have experience investing in the area, I would appreciate any advice!

Brian Perlman · Answer

Hi Erin. I have read that Trenton is one of these older cities here in Jersey is that is poised for a "redevelopment" . The question is when? and how long until this happens that Trenton can become the next up and coming go to city. There are many positives about Trenton, but as I always say to my rental landlords, everyone needs a place to live, so if you are willing to take the unknowns and nervous willies, then take a shot. Would love to connect and increase our network together.

Natalie Schanne · Answer

@Erin Murphy - I live next to Trenton City New Jersey in Ewing Township. I have bought and sold many properties but I have not bought anything in Trenton City because I have heard many stories like the following. Early to joining BiggerPockets in 2017, I went under contract for $40,000 for a brick duplex in Trenton City on Hillcrest Ave. This was a short sale / foreclosure. The guy who owned it was a SEPTA pension retiree in PA who wanted more passive income. He had paid approx $120k. He had bought another property for approx $60k in another part of Trenton. He did a lot of work to the properties himself and tried to take good care. He was being foreclosed because at least one of his tenant wasn't paying and he couldn't afford the mortgage. During the short sale negotiation process, they told me they would not sell it to me for less than $80k. At that time the ARV was $100k, so I offered $60k. They didn't accept. I walked. The bank sold it at sheriff sale 6 months later for $61k. Meanwhile, I'm talking to this guy and he said in his other property, the little old lady paying long term rent, moved out, and within a week, the neighborhood people had broken in, had a party, broke most of his doors, stolen all his copper and HVAC, etc. I observed the vandalism damage with my own eyes, then I wrote him a cash offer, but I offered him like 20k and he didn't take it. I think he lost that one too. Back in that time, sheriff sales sold these houses for $30-50k and they were renting for about $1100-1200/mo. Now many of the houses, especially 4/1 or 4/2 are renting for $2000+/mo and are selling for $100-175k depending on finishes.

What I don't like the most about Trenton City is the high property taxes in relation to the value. A property can be worth $100k and have $6000 of taxes. Or can be worth $200k and have $12,000 of taxes. This dampens your appreciation considerably because people consider apples to apples in terms of total mortgage payments. So $1000 PI + 500 taxes + 100 insurance = the same as $1200 PI + 300 taxes + 100 insurance and when interest rates were 3-4%, 200/mo could buy you $50k more loan, so the house with lower taxes would be worth $150k vs 100k. This is the same investing in PA vs NJ, NJ taxes are just higher.

What's going for New Jersey is we have a lot of well paying jobs, so the rental demand and collected rents and are very high in comparison to many other places in the country. For example, I know many people who have bought a house in Ewing for $200k and it's renting for $4000+ a month and this person has put maybe $50k into it over a couple years including a new roof, updated cosmetics, and was able to BRRR out all the money. (BRRRing in this way is nearly impossible today).

Unless you are part of an investing contingent with a bunch of other landlords with Trenton holdings, like the "Brooklyn" folk, I feel if you are a landlord living 1+ hours away with the plan to have 1-3 properties in the near term, you will get ripped off. Most of the landlords here who are successful, quickly buy 10+ for more economies of scale, have good handymen on staff, and have eviction lawyers / attorneys ready to go. The average tenant in Trenton City is going to have a sub 650 credit score, a lower wage or unstable job, etc. A lot of people choose the more suburban / less dense areas in Ewing or Hamilton when they can find a place that works for them. A lot of Trenton City is dense rowhomes side by side for blocks and blocks. Trenton City also has a lot of board ups where the owners have abandoned their properties to foreclosure or repossession by the city and the City of Trenton owns many houses and doesn't have the resources to do anything with them. They should really resell them, even for $1, but they haven't, and this lack of private property owners results in an even lower tax base (and higher taxes for the people who are paying).

Yes, there are people who invest in Trenton and make good money, but I would consider them very aggressive, take no nonsense type of people. I feel like even investing in and around Bayonne, you could do Airbnb or room rentals or house hack in a way that will be better for you.

Alex Umansky · Answer

@Fred Gonzalo Do you have a recommendation for a contractor in the Trenton area? Thanks!

Investing in Trenton, NJ. Good Idea?

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